The Closed-Form Solution to Bertrand Competition with Exogenous Entry Costs or Participation

University of California, Los Angeles (UCLA); National Bureau of Economic Research (NBER)

Date Written: October 11, 2017

Abstract

With entry costs, there are closed-form solutions for the canonical symmetric common-value Bertrand game. Equilibrium product prices are no longer zero. With zero entry costs, the Bertrand solution obtains; with unit entry cost, the monopoly solution obtains. A more general solution can be found in Lang and Rosenthal (1991).

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